CFPB Eyes Overdraft Regs

Consumer Financial Protection Bureau Director Richard Cordray said his agency is discussing how best to proceed on additional regulations concerning overdraft protection and other checking account disclosures. The CFPB could issue proposed rules later this year.

He said the CFPB is worried about the practice by some financial institutions of clearing checks in a sequence that causes some consumers to pay higher overdraft charges. He made his comments in response to a question at a Feb. 8 virtual town hall meeting sponsored by the NCUA.

Cordray added that the CFPB will not duplicate existing rules so that financial institutions “won’t have to deal with a cacophony of regulations.” He said the rules on overdrafts and checking account disclosures will be part of the CFPB’s “Know Before You Owe” program. The program already includes mortgage cost disclosures, student loans and credit card agreements

He noted that his agency can regulate practices but doesn’t have the power to set the prices of financial products or to set interest rates. He said he is comfortable with those restrictions, which were established in the Dodd-Frank financial overhaul bill that created the CFPB.

Cordray said that the CFPB would consult extensively with credit unions during the rulemaking process. He described the bureau’s advisory council for credit unions as a work in progress. The bureau hasn’t decided what the council’s size will be or how it will select members.

In answer to another question, he said his bureau would consider extending the time that credit unions have to respond to member complaints from three to four weeks. The questioner said that because credit union boards are populated by volunteers it might take them longer to develop an official response to the complaint.

Cordray also said that the CFPB has already taken steps to minimize the impact of some regulations, such as those on remittances, on credit unions and other small financial institutions.

He noted while congressional Republicans have questioned the need for the agency and often asked pointed questions during oversight hearings, that doesn’t bother him.

“We are not afraid of oversight, we embrace it,” he said.

Several hours before the town hall meeting, the House Financial Services Committee discussed several bills that would make key changes to the CFPB.

One bill would make the bureau subject to the regular congressional appropriations process via the Treasury Department. Currently, the bureau is funded by the Federal Reserve, which doesn’t have a budget that is set by Congress.

Another bill would remove the CFPB director from the board of the FDIC.

While those bills could pass in the GOP-controlled House, the Democrats who control the Senate have shown little interest in making structural changes to the bureau.

Last year, the House passed legislation that would mandate that the bureau be run by a five-member board rather than a director. It also approved a bill allowing the CFPB’s decisions to be overturned by a majority vote of the Financial Stability Oversight Council rather than two thirds. The Senate hasn’t taken up either bill.

There is bipartisan support for legislation that the House Financial Services Committee is scheduled to consider on Feb. 16 that would make data submitted by financial institutions to the CFPB subject to attorney-client privilege.

Data submitted to other regulatory agencies is already subject to such protection and lawmakers have said that not including a similar provision in Dodd-Frank was a mistake.